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Small Business Economics

, Volume 53, Issue 4, pp 1079–1096 | Cite as

Trade credit versus bank credit: a simultaneous analysis in European SMEs

  • María-José Palacín-Sánchez
  • Francisco-Javier Canto-CuevasEmail author
  • Filippo di-Pietro
Article
First Online:

Abstract

Trade credit and bank credit constitute two of the most important external sources of finance for small firms. The purpose of this paper, first and foremost, is to explore the complementary or substitutive relationship between trade credit and bank credit by considering the joint determination of both resources on small and medium-sized enterprises (SMEs), and second, it analyses how the country institutional factors affect these two resources. Specifically, we introduce the efficiency of the legal system and the development of the financial sector. For the empirical analysis, we use a simultaneous equations model across a sample of 60,377 SMEs operating in 12 European Union countries over the period 2008–2014. The results suggest that two resources, trade credit and short-term bank credit, are simultaneously determined and negatively related in SMEs. The results also suggest that trade credit and bank credit depend on country institutional factors.

Keywords

Trade credit Bank credit Legal system SMEs Financial development 

JEL

G21 G32 K4 L26 
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Notes

Acknowledgments

We are indebted to two anonymous reviewers for their valuable comments and suggestions. We remain responsible for any errors or omissions.

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© Springer Science+Business Media, LLC, part of Springer Nature 2018

Authors and Affiliations

  • María-José Palacín-Sánchez
    • 1
  • Francisco-Javier Canto-Cuevas
    • 1
    Email author
  • Filippo di-Pietro
    • 1
  1. 1.Departamento de Economía Financiera y Dirección de OperacionesUniversidad de SevillaSevillaSpain

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